Upon arrival at Dubai’s international airport, travelers can pick up a free guide to the city’s top attractions and events. Curiously, the cover of this month’s “Time Out -DXB” beckons visitors to Saudi Arabia. Emblazoned with an image of the kingdom’s ancient Diriyah fort near the Saudi capital, it reads: “Welcome to Arabia. A Journey You’ve Never Imagined.”
The landlocked, once ultraconservative capital of Riyadh is pitching itself as a city where concerts, movie theaters, world-class sporting events and deal-making are in abundance; where revamped cultural heritage sites wait to be discovered, distinguishing Saudi Arabia from other Gulf capitals defined by sprawling malls and high-rise hotels.
The pitch is part of Saudi Arabia’s plan to grab the limelight and title as the region’s top place to do business. Currently, the more glamorous emirate of Dubai is seen as the region’s hub for finance and tourism.
There are incentives – or, some say, penalties – for businesses to consider: Saudi Arabia has told companies they have until the beginning of 2024 to relocate their regional headquarters to the country or lose out on lucrative government contracts that keep the region’s biggest economy humming.
It’s the latest move by Crown Prince Mohammed bin Salman (MBS), the kingdom’s day-to-day leader, who’s been empowered by his father, King Salman, to overhaul the economy and reduce its dependence on oil for revenue.
Some investors and their shareholders, however, remain wary of the 36-year-old prince. Four years ago – at the very same Ritz-Carlton hotel where a key investment forum took place last week and where 44 multinational companies announced their plans to establish regional headquarters in Riyadh – MBS oversaw the unprecedented detention of Saudi business leaders, princes and officers in a purported anti-corruption sweep.
The campaign, described by critics as a shakedown, largely took place outside of the courts and public view. It netted the kingdom more than $100 billion in assets and cash, according to the government. It also cemented the crown prince’s grip on power.
Saudi Investment Minister Khalid al-Falih said a move by companies to Riyadh is a “win-win.”
“It’s important for us, but it’s even more important for the companies because they will get the benefits of being closer to decision makers,” al-Falih told The Associated Press (AP) in an interview on the sidelines of the Future Investment Initiative Forum in Riyadh.
He said the intent “is not to penalize companies” but to show them access to “the biggest market in the region.” The government hopes the “Regional Headquarters Attraction Program” will add $18 billion to the local economy and create 30,000 new jobs over the next decade.
Creating jobs and diversifying the economy sit at the heart of MBS’ Vision 2030 blueprint for transforming the country. He is set to inherit a nation where over a third of the population is under 14, and more than 60% are under 35.
The prince is partly looking to the $450 billion Public Investment Fund, the kingdom’s sovereign wealth fund, to generate jobs and non-oil economic growth through state-backed mega-projects, like the $50 billion heritage project in Diriyah just outside Riyadh featured on the cover of Dubai’s airport magazine.
Some investors remain concerned about doing business in the kingdom, said Ayham Kamel, head of the Middle East division at Eurasia Group, a political risk consultancy that advises companies. He said there is little clarity on tax incentives for businesses that will relocate or whether they will need to adhere to a Saudi hiring quota.
The investment minister said the kingdom is working on providing clear answers. “To be honest, we had challenges the first five years because our regulations were not ready,” al-Falih said. “That is now either done or on it’s way of being done in the next couple of years.”
Al-Falih said Saudi Arabia wants to be seen as a safe place to do business. He said the self-declared anti-corruption campaign should be seen as a positive sign that the kingdom is “starting a new page” where foreign investors can find a “level playing field.”
Investors remain tepid about Saudi Arabia, though the figures are improving. Foreign direct investment to the kingdom plummeted dramatically to $1.42 billion in 2017, the year MBS sidelined his more experienced, older cousin to become crown prince and the year he launched what he called an anti-corruption campaign.
Last year, foreign direct investment (FDI) climbed to $4.6 billion, but that’s still less than in 2016 when it stood at $7.5 billion. The figures are dwarfed by inflows to neighboring United Arab Emirates (UAE), where FDI reached $13.8 billion last year.
Some see the kingdom’s ambitions as a direct challenge to the UAE’s emirate of Dubai, which exudes luxury with its trendy bars and restaurants, five-star hotels, endless shopping and family-friendly beaches tailored for Western lifestyles and Asian tourists. For many, Riyadh remains lackluster in comparison.
Dubai is currently hosting Expo 2020. Last week, Saudi Arabia announced Riyadh’s bid to play host to the six-month-long fair in 2030.
Al-Falih brushed aside any comparisons to Dubai,saying Riyadh is simply claiming what he believes is its “appropriate place as the capital of the Middle East.”
“We are the biggest economy. We are the geopolitical capital of the region,” he added. “And we have the biggest ambition. We have the biggest opportunities.”